Family Glitch in ACA Fixed

The IRS has issued a new rule that fixes the “family glitch” in the Affordable Care Act (ACA).  As background, taxpayers generally are not eligible for health insurance premium tax credits for coverage purchased on the Marketplace if they are eligible for affordable coverage through their employer.  An employer’s plan is considered unaffordable if the employee has to contribute more than a certain percentage of their income toward premiums (adjusted for inflation each year).  This threshold has been applied to the cost of self-only coverage, meaning an employee and covered dependents would not be eligible to receive subsidy assistance on the Marketplace even if the cost of family coverage exceeded the threshold.

The final regulations eliminate the family glitch, applying the affordability threshold to both self-only and family coverage.  Beginning in 2023, employer-provided health insurance coverage is deemed unaffordable if the premium exceeds 9.12% of the employee’s household income, determined separately for the employee (premium based on self-only coverage) and for family members (premium based on the total cost of family coverage).

If you have questions on the affordability standard under the ACA, call ASR Health Benefits at (616) 957-1751 or (800) 968-2449.